Question 1

Financial accounting standards influence the behavior of managers and other internal users.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a characteristic of objectives-based standards?

Accepted Answer

A)  do not rely on professional judgment 
B)  increase bright-line tests 
C)  somewhere between principles-based and rules-based 
D)  no exceptions 
A)  do not rely on professional judgment 
B)  increase bright-line tests 
C)  somewhere between principles-based and rules-based 
D)  no exceptions

Question 3

Which of the following is a bright-line test?

Accepted Answer

A)  An item is deemed material if it is large enough to influence the CEO's decision making. 
B)  An item is deemed material if it exceeds 10% of net income. 
C)  An item is deemed material if it is large in size. 
D)  An item is deemed material if it is large enough to influence an investor's decision making. 
A)  An item is deemed material if it is large enough to influence the CEO's decision making. 
B)  An item is deemed material if it exceeds 10% of net income. 
C)  An item is deemed material if it is large in size. 
D)  An item is deemed material if it is large enough to influence an investor's decision making.

Question 4

Financial information includes information that is not governed by rules set forth by the accounting standard-setting bodies.

Accepted Answer

A) True 
 B)False

Question 5

Principles-based standards are deemed to be more optimal than rules-based standards and objectives-based standards.

Accepted Answer

A) True 
 B)False

Question 6

Equity investors include all but which of the following?

Accepted Answer

A)  Partners 
B)  Shareholders 
C)  Bondholders 
D)  Sole proprietor 
A)  Partners 
B)  Shareholders 
C)  Bondholders 
D)  Sole proprietor

Question 7

Standard setters develop accounting standards based on natural economic laws.

Accepted Answer

A) True 
 B)False

Question 8

The FASB promulgates accounting standards in the U.S. and the IFRS issues international accounting standards.

Accepted Answer

A) True 
 B)False

Question 9

Official U.S. GAAP consist of the bulletins, opinions, and statements issued by the CAP, the APB, and the FASB.

Accepted Answer

A) True 
 B)False

Question 10

Rules-based standards rely on theories and concepts that are linked to a well-developed theoretical framework.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about the global standard-setting structure is false?

Accepted Answer

A)  The IFRS Interpretations Committee is similar to the EITF in the U.S. 
B)  The Monitoring Board was formed to enhance public accountability of the IFRS Foundation. 
C)  The IASB oversees the IFRS Advisory Council which advises the Monitoring Board. 
D)  The IFRS Foundation oversees the IASB and finances IASB operations. 
A)  The IFRS Interpretations Committee is similar to the EITF in the U.S. 
B)  The Monitoring Board was formed to enhance public accountability of the IFRS Foundation. 
C)  The IASB oversees the IFRS Advisory Council which advises the Monitoring Board. 
D)  The IFRS Foundation oversees the IASB and finances IASB operations.

Question 12

Objectives-based standards are deemed to be more optimal than rules-based standards and principles-based standards.

Accepted Answer

A) True 
 B)False

Question 13

In what ways does accounting information proactively interact with its environment?

Accepted Answer

Financial accounting is proactive in tha

Question 14

Which financial statement is implicitly considered dominant as standard setting shifts toward the asset/liability approach?

Accepted Answer

A)  statement of financial position 
B)  statement of cash flows 
C)  statement of shareholders' equity 
D)  statement of comprehensive income 
A)  statement of financial position 
B)  statement of cash flows 
C)  statement of shareholders' equity 
D)  statement of comprehensive income

Question 15

Which organization is responsible for setting auditing standards and overseeing the audits of public companies in the United States?

Accepted Answer

A)  Financial Accounting Standards Board 
B)  Public Company Accounting Oversight Board 
C)  American Institute of Certified Public Accountants 
D)  Securities and Exchange Commission 
A)  Financial Accounting Standards Board 
B)  Public Company Accounting Oversight Board 
C)  American Institute of Certified Public Accountants 
D)  Securities and Exchange Commission

Question 16

The FASB is a subcommittee of the AICPA.

Accepted Answer

A) True 
 B)False

Question 17

Accountants in the United States do not need to learn international accounting standards.

Accepted Answer

A) True 
 B)False

Question 18

Theories and procedures that evolve as a result of lobbying from various groups are examples of proactive factors within the legal, economic, political, and social environment.

Accepted Answer

A) True 
 B)False

Question 19

In addition to the comments obtained from responses to the exposure drafts and public round tables, the U.S. standard setting process relies on the information gathered and opinions from all of the following except ________.

Accepted Answer

A)  the Monitoring Board 
B)  users 
C)  managers 
D)  auditors 
A)  the Monitoring Board 
B)  users 
C)  managers 
D)  auditors

Question 20

Which of the following user groups consists of individuals who expect to receive a return on their investment?

Accepted Answer

A)  employees 
B)  equity investors 
C)  creditors 
D)  suppliers and customers 
A)  employees 
B)  equity investors 
C)  creditors 
D)  suppliers and customers

Exam 1: The Financial Reporting Environment

Financial accounting standards influence the behavior of managers and other internal users.

Which of the following is a characteristic of objectives-based standards?

Which of the following is a bright-line test?

Financial information includes information that is not governed by rules set forth by the accounting standard-setting bodies.

Principles-based standards are deemed to be more optimal than rules-based standards and objectives-based standards.

Equity investors include all but which of the following?

Standard setters develop accounting standards based on natural economic laws.

The FASB promulgates accounting standards in the U.S. and the IFRS issues international accounting standards.

Official U.S. GAAP consist of the bulletins, opinions, and statements issued by the CAP, the APB, and the FASB.

Rules-based standards rely on theories and concepts that are linked to a well-developed theoretical framework.

Which of the following statements about the global standard-setting structure is false?

Objectives-based standards are deemed to be more optimal than rules-based standards and principles-based standards.

In what ways does accounting information proactively interact with its environment?

Which financial statement is implicitly considered dominant as standard setting shifts toward the asset/liability approach?

Which organization is responsible for setting auditing standards and overseeing the audits of public companies in the United States?

The FASB is a subcommittee of the AICPA.

Accountants in the United States do not need to learn international accounting standards.

Theories and procedures that evolve as a result of lobbying from various groups are examples of proactive factors within the legal, economic, political, and social environment.

In addition to the comments obtained from responses to the exposure drafts and public round tables, the U.S. standard setting process relies on the information gathered and opinions from all of the following except ________.

Which of the following user groups consists of individuals who expect to receive a return on their investment?

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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